NSE 20 UP, NASI And NSE 25 Down In Week One Of March

The equities market recorded mixed performance, with NSE 20 gaining by 1.3 percent, while NASI and NSE 25 declined by 2.2 and 1.0 percent respectively.

The mixed performance of the equities took their YTD performance to gains of 6.3, 5.2, and 3.7 percent for NASI, NSE 25, and NSE 20 respectively.

The equities market performance was driven by gains recorded by large-cap stocks such as NCBA, Diamond Trust Bank (DTB-K), and EABL of 5.7, 3.6, and 1.8 percent, respectively.

The gains were however weighed down by losses recorded by stocks such as Bamburi, Safaricom, and BAT, which declined by 3.9, 3.7, and 1.8 percent, respectively.

Equities turnover declined by 32.6 percent during the week to USD 19.5 mn, from USD 29.0 mn recorded the previous week, taking the YTD turnover to USD 198.2 mn.

Foreign investors turned net sellers, with a net selling position of USD 2.5 mn, from a net buying position of USD 0.1 mn recorded the previous week, taking the YTD net selling position to USD 2.5 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 11.9x, 7.6 percent below the 11-year historical average of 12.9x.

The average dividend yield is currently at 4.4 percent, 0.1percentage points above the 4.3percent recorded the previous week, and 0.3 percent points above the historical average of 4.1 percent.

With the market trading at valuations below the historical average, we believe that there are pockets of value in the market for investors with a higher risk tolerance.

The current P/E valuation of 11.9x is 55.1% above the most recent valuation trough of 7.7x experienced in the first week of August 2020. The charts below indicate the market’s historical P/E and dividend yield.

“We are “Neutral” on the Equities markets in the short term. We expect the recent discovery of a new strain of COVID-19 coupled with the introduction of strict lockdown measures in major economies to continue dampening the economic outlook,” said Cytonn.

“However, we maintain our bias towards a “Bullish” equities markets in the medium to long term. We believe there exist pockets of value in the market, with a bias on financial services stocks given the resilience exhibited in the sector.”

The sector is currently trading at historically cheaper valuations and as such, presents attractive opportunities for investors.

READ: NASI, NSE 25, And NSE 20 Record Smiles During The Week